Change in Company Business Activity
A company may decide to change its business activity due to market expansion, diversification, or strategic realignment. Any such change must be properly documented and reported to the Ministry of Corporate Affairs (MCA) and other relevant authorities to maintain compliance with the Companies Act, 2013.
Key Reasons for Changing Business Activity
Expansion into new industries
Companies often expand beyond their initial scope to capitalize on emerging opportunities or to leverage existing capabilities in adjacent markets.
Diversification of operations
To mitigate risks, businesses may diversify their activities across multiple sectors to ensure stability during market fluctuations.
Compliance with regulatory changes
Regulatory shifts may necessitate realignment of business activities to maintain legal compliance in a changing legislative environment.
Market-driven strategic shift
Evolving market dynamics, consumer preferences, or technological disruptions may prompt companies to pivot their business focus for continued relevance.
Legal Compliance for Changing Business Activity
The company must update its Memorandum of Association (MoA) if the change in business activity alters its Main Objects Clause. This requires:
- Board Resolution – Approval by the Board of Directors.
- Special Resolution in General Meeting – Approval by shareholders via an Extraordinary General Meeting (EGM).
- Filing with MCA – Submission of necessary forms and documents.
Consequences of Non-Compliance
Failure to update business activity with the MCA may result in:
Penalties & fines under the Companies Act, 2013 – The Act prescribes monetary penalties for non-compliance which can become quite substantial if violations persist.
Rejection of business-related applications – Future applications with the MCA, ROC, and other authorities may be rejected if discrepancies are found in the declared business activities.
Compliance-related complications affecting future filings – Non-compliance can create a domino effect, impacting other statutory filings and potentially leading to the company being flagged for enhanced scrutiny.
Step-by-Step Process for Changing Business Activity
Board Meeting & Resolution
Convene a Board Meeting to discuss and approve the proposed change.
Pass a resolution to amend the Main Object Clause of the MoA.
Schedule an Extraordinary General Meeting (EGM) for shareholder approval.
Shareholders' Approval
Conduct an EGM and obtain shareholder approval via a Special Resolution.
File MGT-14 with the MCA within 30 days of passing the resolution.
Amendment of MoA
Modify the Main Object Clause to reflect the new business activity.
ROC Filing
Submit MGT-14 (Special Resolution for Object Clause amendment).
File INC-22 (if change requires a new registered office).
Submit INC-20A (for commencement of new business, if applicable).
Update Other Licenses
Modify GST Registration if the new activity affects tax classification.
Update business licenses such as MSME, IEC, FSSAI, etc.
Inform banks and financial institutions about the change.
Timeline for Business Activity Change
Our Business Activity Change Services
- End-to-End Compliance Management – Complete assistance for updating your business activity.
- Expert Document Preparation – Drafting of all required resolutions and MoA amendments.
- Timely MCA Filings – Ensuring all forms are filed within statutory deadlines.
- Comprehensive License Updates – Support for modifying all business registrations and licenses.